Photo source: digwatch - Photo: 2022

Shanghai Organization Could Unite Region’s Big Powers to Drive the Global Economy

By Kalinga Seneviratne

NUR-SULTAN, Kazakhstan (IDN) — For the first time, the summit meeting of the Shanghai Cooperation Organisation (SCO) attracted international and regional media attention because the Ukraine crisis has made the region’s powerhouses China, Russia and India major players in the global economy.

The 22nd Meeting of the Council of Heads of State of the SCO took place in the historical city of Samarkand, in Uzbekistan, on September 15 and 16.

The three leaders, China’s Xi Jinping, Russia’s Vladimir Putin and India’s Narendra Modi, were in the same room for the first time since the Ukraine crisis unfolded.

Though the media focused on bilateral meetings that took place (or not) between these leaders, the real importance of this meeting should be on at least two areas of utmost importance for the international community—the developing connectivity across Central Asia that is reigniting memories of the great Silk Routes of the past that opened up trade and cultural exchanges between the East and West, and moves towards building a new global financial architecture that has been quietly discussed within SCO for a few years now.

In addition to the three major economies of the world, SCO membership also includes energy-rich Kazakhstan, Kyrgyzstan and Uzbekistan. In contrast, Iran, another energy-rich nation, was approved to join the grouping this year. Two others, Saudi Arabia and Qatar, were given dialogue partner status at this year’s meeting.

According to a recent study by China’s Qingdao Customs and Qingdao-based Ocean University, the total trade volume of SCO members increased from $667.09 billion in 2001 to $6.06 trillion in 2020. In addition, the share of SCO members in global trade rose from 5.4 per cent in 2001 to 17.5 per cent in 2020.

In 2003, heads of the SCO member-states signed a 20-year ‘Programme of Multilateral Trade and Economic Cooperation intended to create a free trade zone within the SCO territory as a long-term goal, but such a plan has not materialized so far. However, an SCO inter-bank consortium has been established to facilitate funding for investment by member states and an SCO development bank is being planned.

In his address to the SCO summit, Chinese President Xi said, “SCO is an important constructive force in international and regional affairs” and that member states should enhance mutual support to uphold security and development interests. He warned member states to “guard against attempts by external forces to instigate ‘color revolution’, and jointly oppose interference in other countries internal affairs under any pretext”.

Xi also reiterated China’s desire to see its belt and road initiative (BRI) adopted more widely in the region with complementary national development strategies and regional cooperation initiatives.

Connectivity and a new global financial architecture has gathered added value since the Ukrainian crisis triggered western financial sanctions on Russia, which has in turn, seriously impacted international trade and financial transactions, raising questions about the global supply chains and banking procedures.

Xi’s address to the Samarkand summit signalled that a new global economic architecture is been planned by SCO member states.

“We need to ensure implementation of the roadmap for SCO member states to expand shares of local currency settlement, better develop the system for cross-border payment and settlement in local currencies, work for the establishment of an SCO development bank, and thus speed up regional economic integration,” Xi said in his address to the summit. He added that next year, China will host an SCO ministers’ meeting on development cooperation and an industrial and supply chains forum.

“The year 2022 is an extraordinary year for the world,” noted Adil Kaukenov, Senior Fellow, Kazakhstan Institute of Strategic Studies, in an interview with IDN. “Before we believed global system is more important than region, we used to discuss what is more important. (But now we think) the regional system gives us more stability in the global architecture. Now we see we need a parallel regional system because it makes us more stable because global can change suddenly.”

Kaukenov believes that SCO, though its membership is small, its economic clout is big. “It is easier to focus, and now with Iran joining, it’s big news … because Iran for us is a big partner. We have a water project and also a railway linking Iran, Kazakhstan and Turkmenistan.”

He points out further that Kazakhstan, as an energy-rich country in the centre of the region with good relations with China and Russia stand to gain a lot with expanding connectivity and cooperation in the region.

This point is reflected in the fact that when the Ukraine crisis erupted, two-thirds of oil exports of the country took place via the Caspian Pipeline Consortium (CPC), the world’s largest international oil transportation project involving Russian and Kazakh companies to the Russian port of Novorossiysk on the Black Sea.

When the country’s oil exports through this route were disrupted several times, Kazakhstan turned to another route, the Trans-Caspian International Transport Route, which runs through China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Turkey, and the European countries.

In his address to the summit, Kazakhstan President Kassym-Jomart Tokayev said that the task is transforming the SCO into a global economic platform, noting the huge economic potential of the SCO member states that account for nearly a quarter of the world’s GDP or more than $23 trillion.

“Our organization unites dynamically developing world economies with enormous human, resource, and technological potential…. We have at our disposal the richest reserves of energy resources, coal, rare metals, and sources of renewable energy,” said Tokayev.

Indian Prime Minister Narendra Modi, in his address to the summit put across a similar view. “Today, when the whole world is facing the challenges of economic recovery after the pandemic, the role of SCO becomes very important. SCO member countries contribute about 30 per cent of global GDP, and 40 per cent of the world’s population also lives in SCO countries,” he pointed out.

“The pandemic and the crisis in Ukraine caused many obstacles in global supply chains, due to which the whole world is facing an unprecedented energy and food crisis. SCO must make efforts to develop reliable, resilient and diversified supply chains in our region. This will require better connectivity, as well as it will be important that we all give each other full right to transit.”

While China is focusing on building railways via the BRI, India is promoting its own connectivity with the region through the Chabahar Port project with Iran and the International North-South Transport Corridor (INSTC), a 7,200 km multi-mode transport project that moves through India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.

“There is a huge difference between China’s BRI and India’s Chabahar port or INSTC. China’s BRI has some political aspirations attached to it. India’s projects in Central Asia or the INSTC are free of political aspirations. They truly want to integrate with the Central Asian region,” Dr Pravesh Kumar Gupta, Senior Research Associate at the Vivekananda International Foundation in New Delhi, told IDN.

He also added that in India’s projects, the infrastructure is already there, while Chinese projects are mostly in the construction phase. “After the Ukraine crisis, Russia is now promoting southbound roads… both Chabahar Port and INSTC are going to be very relevant at this point of time.”

India is due to take over the presidency of SCO from Uzbekistan at the end of this year. “Our priority, as stated by Modi in his speech, is to promote the cultural and economic potential of SCO… we need to promote the region as a manufacturing hub, and we need to take care of supply chains,” says Dr Gupta.

He is of the view that China is not promoting cultural exchanges in the region because much of the cultural influences in the region in the past came from Buddhism, which originated in India. “We have a lot of similarities in Central Asian (musical) cultures too, and there are even Hindus traces in Central Asian culture,” he added.

There was one silver lining in the rivalry between India and China in the region. Modi mentioned in his address that World Health Organization’s (WHO) first and only global centre for traditional medicine has been established in Gujarat in April 2022, and “India will initiate a new SCO working group on traditional medicine”.

President Xi asserted that SCO needs to establish people-to-people cultural exchanges, and one of the points he mentioned was China establishing a forum on traditional medicine. [IDN-InDepthNews – 21 September 2022]

Photo source: digwatch

IDN is the flagship agency of the Non-profit International Press Syndicate.

This article is published under the Creative Commons Attribution 4.0 International licence. You are free to share, remix, tweak and build upon it non-commercially. Please give due credit.

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